Bank of Japan on high alert: USD/JPY tests Key 158.00 Resistance

The Bank of Japan (BoJ) and the Ministry of Finance have been expressing deepening concern over the Yen's trajectory, a move exaggerated by broad US Dollar strength fueled by the Fed's own hawkish repricing.

A recent meeting between the fiscally dovish Prime Minister Sanae Takaichi and BoJ Governor Kazuo Ueda has seemingly failed to calm the squeeze in this most volatile of FX pairs.

The pair is up over 3% since the start of November trading, recently testing the 158.00 level in a relentless race higher.

Participants are now actively pricing in potential BoJ intervention; however, historical action suggests these moves are often faded by the market, rendering them inefficient.

Some analysts point to a most-effective window for intervention during the Thanksgiving holiday liquidity drain, when fewer traders are present to fade the move, though a continuation of this move could force a "first round" of action even sooner.

Ultimately, this relentless market pressure may force the BoJ's hand to hike rates despite PM Takaichi's well-known opposition to tightening—a menace that has lingered since her appointment.

Only a reassuring and decisive monetary policy shift is likely to halt the squeeze, much like it did last July.

Fiscal recklessness is a force markets always reckon with, and traders are currently testing the BoJ's resilience against the current government's dovish agenda.

Let's dive right into a High to short timeframe analysis of USD/JPY.

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Now above 8,000 pips from its 50-week Moving Average, the USD/JPY is coming close to its 2025 January peak with brutal strength.

Mean-reversion for such moves is a painful trade, with the Weekly candles all overlapping each other in a weekly tight-bull channel.

The only sign of reversion would be a weekly candle closing below the prior bar, and these often comes when momentum slows down.

But there aren't many signs of a slowdown on the weekly timeframe for now.

The weekly RSI is also coming towards overbought, but with no divergence yet, it will be important to see if "Urgent" warnings from the Finance Minister serve to slow down the move.

Some profit-taking mean-reversion is currently going through as prices came very close to the 158.00 handle (157.895 session highs).

USD/JPY technical levels of interest:

Support Levels:

• 153.00 to 154.00 Key Resistance now Pivot
• 154.420 Weekly lows
• 10-Day MA 151.50
• 150.00 Psychological Support and 50-Week MA
• 146.00 August Range Main Support

Resistance Levels:

• Session highs 157.895
• Key Resistance 157.00 to 158.00 (testing)
• 2025 Highs and April 2024 peaks 158.80 to 160.00
• 1990 and July 2024 Peak 161.00 to 162.00

Shorter timeframes point to some imminent indecision, with the past two 8H Candles forming Dojis right below the 158.00 level.

Mean reversion is far from guaranteed after such a squeeze, as the Tight bull channel also corroborates on this timeframe.

Nonetheless, a slow down in the buying points to a local top.

Keep an eye on these two points:

• 157.895 – Session highs: Any hourly close above should prompt continuation higher.
• 156.850 – A daily close below may trigger further profit-taking.
• 156.00 – A retest of the broken wedge may act as dip-buying point.
• Intervention might act all the way to 150.00 if efficient.

Keep a close eye on Bank of Japan communications.

Safe Trades!

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